Fail early, fail often – what research has to say

In a recent opinion piece in The Conversation, Professor Andre Spicer from Cass Business School takes issue with some aspects of Turnbull’s National Innovation & Science Agenda.

At this time I believe we have much more reason to celebrate the positives of Turnbull’s innovation agenda than to dissect the details that may be debatable. Further, it is perhaps not entirely correct to say that the idea of learning form failure is “at the heart” of the multi-faceted initiatives in the agenda. This said, Andre is right in suggesting that the evidence on entrepreneurs learning from failure is weak. I am myself currently involved in research following up on entrepreneurs who have recently experienced bankruptcy. Among other things, the results suggest—ironically—that the entrepreneurs who are most motivated to try again are those who have learned the least from the previous failure.

This does not mean that measures to ease the stigma of failure are wrong; it just suggests that the motivation for doing so may not be the right one. A better reason for going softer on those who fail is that we live in a society which systematically punishes bad luck (and over-rewards good luck). This, in turn is due to a bias we all seem hardwired to succumb to unless we make considered efforts not to do so: the fundamental attribution error of ascribing actions and outcomes to characteristics of the agent (i.e., the entrepreneur) while under-estimating the importance of situational factors. By its very nature, entrepreneurial action often resides in the domain of the genuinely uncertain. Hence, failure is often due to factors that are genuinely unknowable at the outset, and does not predominantly occur because entrepreneurs do “stupid things”.

When it comes to “fashionable ideas”, Andre seems willing to help perpetuate exaggerations of the frequency and severity of entrepreneurial failure (see http://eprints.qut.edu.au/52716/). Exit is very common; failure with severe financial, psychological and social consequences is immensely less frequent. In our own large scale study, 76 per cent of nascent firms and 60 per cent of young firms report no loss upon termination of the venture. Only 13 per cent of terminating nascent founders and 6 per cent of young firm founders rated their experience as negative or very negative (see http://tinyurl.com/zcapla5). Moreover, a failed venture does not imply a failed entrepreneur.

As regards gaps in the innovation statement I think Andre identifies a more important one in suggesting “similar measures designed to support innovation in larger firms”. It does not appear to me that big business in Australia excels in investing in R&D or seeking collaboration with relevant research frontiers in universities. If we had more CEOs with a “Turnbull mentality” and fewer of “Abbott stock” we could likely look forward to a brighter future for Australia. Clever political re-arrangement of institutional conditions might facilitate such a transition.

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Building on ISPIM conference!

As/Pro Roxanne Zolin used the opportunity of the ISPIM conference to consolidate a research partnership with Professor Matthias Fink and some of his PhD students. Following the conference presentations the group shared their research interests and opportunities for research funding and projects.   Professor Matthias Fink and Roxanne share an interest in immigrant and refugee entrepreneurship. Michael Gusenbauer, a Ph.D candidate at the Institute for Innovation Management (ifi) at the Johannes Kepler University Linz, gave a presentation of his PhD on Innovation Offshoring.  Johannes Gartner talked about his interests in Gamification for a T&L Grant. And Daniela shared her interests in SME banking. The group hope to reunite in Vienna next year.

From right to left: Johannes Gartner, Johannes Kepler University (JKU), Professor Matthias Fink, JKU, As/Pro Roxanne Zolin, QUT, Michael Gusenbauer, JKU and Daniela Maresch, JKU.

From right to left: Johannes Gartner, Johannes Kepler University (JKU), Professor Matthias Fink, JKU, As/Pro Roxanne Zolin, QUT, Michael Gusenbauer, JKU and Daniela Maresch, JKU.

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